pakistan logistics
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Logistics and Pakistan
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Pakistans logistics is an important economicsector with significant growth and investmentpotential.
It is also a key driver for private sectordevelopment, economic growth and overalldevelopment.
There is a clear relationship between acountrys logistics performance, lead times andits export performance.
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In Pakistan, there it is a critical inefficiencies in
our logistics chain, resulting in a 45 percent
excess in export times compared to one of the
European country (Spain) and higher logistics
costs (35-40 percent of retail price compared to
22 percent in that country), leaving much room
for improvements in the sector.
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In Pakistan, there it should be a coordinationbetween government and the private sector to
improve logistics efficiencies. These include:
Establishing freight villages to serve as logistics hubs
Investing in reefer storage facilities to increase the
shelf life of perishable goods
Developing trading platforms for smaller and medium
size producers to sell their goods.
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A good way to measure a countrys logistics
expertise is the Logistic Performance Index (LPI),
an indicator compiled by the World Bank.
According to this index, Pakistan lags slightly
above the regional average and is clearly behind
the EU average. Pakistans biggest weaknesses
according to the LPI are in the Infrastructure
(2.37) and Customs (2.41).
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Country Overall LPI Country Overall LPI
UAE 3.73 Pakistan 2.62
EU 3.67 MENA 2.42
Israel 3.21 Morocco 2.38
Saudi Arabia 3.02 Egypt 2.37
Oman 2.92 Lebanon 2.37
Jordan 2.89 Syria 2.09
Tunisia 2.76 Algeria 2.06
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Pakistans Logistic Sector Size
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Composition and Characteristics ofPakistans Transport Market
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Logistical chain or ORANGES exporting to Europe
from PAKISTAN V/S SPAIN
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Due to inefficiencies at several points in the logistics
chain, citrus export times in Pakistan is Approx 27 days
longer than in Spain.
Although 55 percent of this time (15 days) is due toPakistans longer distance to the European destination
markets, 45 percent (12 days) is due to Pakistans lower
efficiency in the logistics chains.
In sum, inefficiencies in Pakistans logistics value chain
are responsible for a 45 percent excess time.
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There are opportunities to improve reliability,
lead times, and costs in the Pakistani citrus
export chain. These opportunities are at the
most critical points of the logistics chain, in
areas such as trucking, warehousing, customs,
and maritime services.
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Transportation Industry
Of Pakistan
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Road Transport
Pakistans freight transport is dominated by road
transportation. This is similar to most OECD countries;
however rail services play a bigger role in these countries
than in Pakistan
The biggest challenges faced by this industry is
Infrastructure and trucking regulations.
The dependence of Pakistani logistics chain on roadservices makes it even more vital for these problems to be
corrected to decrease export time and, thereby opening up
new markets for Pakistani exports.
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Road Infrastructure Assessment
In Pakistan, there are approximately 260,000 km of
roads, of which about 60 percent are paved.
The main artery in the country is the National Trade
Corridor (NTC), a 1,760 km long. Its length is less
than 1 percent of the total road network of Pakistan,
but it serves over 80 percent of the urban population.It is managed by the National Highway Authority
(NHA).
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Transit times of Pakistani road transportation is 3
times greater than Europe and East Asia.
A trip from Lahore to Karachi (1,260 km) takes about
2 days, while from Peshawar to Karachi (1,700 km)takes 3 days. The presence of non-motorized traffic
and even pedestrians reduces traffic capacity.
Operating conditions are further intensified by
extensive commercial activities located along theroads, poor physical condition of the roads, and lack
of traffic management in towns.
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Another feature of Pakistans road network is
its low density, which leaves several areas
underserved. This shows when comparing
Pakistans road density with that ofneighboring countries such as Bangladesh, Sri
Lanka, India or Afghanistan. In this
comparison Pakistan only is in a betterposition than Afghanistan.
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Road network size in km) in terms of a
countrys area in sq-km)
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Road Services Assessment
Weak road transportation services is one of the main
logistical challenges in Pakistan. Bottlenecks like a
large informal trucking sector and a lack ofrefrigerated vehicles, Pakistani perishable goods face
a higher logistics costs and lower shelf life, making it
more difficult to compete internationally.
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Not only is trucking the main way for moving
goods domestically, but it is also an essential link
in the Pakistani export chain for goods shipped by
sea and, to a lesser extent, by air. Truck loadsaccount for 206,404 million tons-km of goods per
year, about 93 percent of the countrys total.
For agricultural goods, there is no alternativetransport mean for transporting fruits and
vegetables out of rural harvesting areas.
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Despite its importance, the Pakistani road transport isimmature as a service sector. Absence of qualified
service providers is one of the main issue in providing
good logistics services.
Most providers have a small fleet, even with 2 trucks per
owner, means that most trucks are not owned by a formal
company, but by individual drivers. Moreover, many
trucks are in poor condition, with high average age, andthere is very few specialized vehicles with reefer devices
or refrigerated trucks available to transport perishable
goods.
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One direct consequence of the unreliable road
service available in the country is high
working capital requirements, as higher safety
inventories are needed. Producers of certaingoods are also forced to invest their resources
in non-core activities such as their own truck
fleet, which increases shipping-related costs.
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In summary, the trucking sector in Pakistan is
poorly regulated with about 70 percent of
trucks part of the informal sector. This
environment provides little appeal to largesophisticated operators and service providers
willing to enter the market due to low prices,
low margins and generally unfair competition.
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These problems are mainly caused due to a lack of
enforcement of rules on vehicle inspection, driving
license concession, overloading, and hazardous cargo
handling. Motor Vehicle Ordinance 1965, incorporating federal and
provincial amendments, is an old and outdated regulation
if compared with best practices from OECD countries
Obtaining a driving license in Pakistan is relatively easy.
There are no proper training schools, instructors,
equipped vehicles, or testing and licensing facilities.
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The National Highway Authority (NHA),which was created in 1991, focuses its activityin the planning, development, operation, repair
and maintenance of the national highways andother strategic roads.
However, the total length of the roads underNHA management only stands at 8,780 km,which accounts for about 3 percent of theentire road network in the country.
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Road Transport Recommendations
Regulate trucking industry
Increase the capacity of transportation used in
transferring perishable goods Provide incentives to renew trucking fleets
(Mexico and USA have worked on it )
Reshape the current insurance structure Improve the Operation of the National Trade
Corridor (NTC)
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Road Transport Recommendations
Expand the role of NHA
Benchmark with other transport regulatoryauthorities like:
Spanish General Directorate for Traffic (DGT)
The Finnish National Road Administration
(Finnra)
The Dutch Road Authority.
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Sea Transport
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Maritime transport accounts for 91 percent of
Pakistans international trade.
The main ports in Pakistan are Karachi, Qasim
and Gwadar. In 2006, 55.85 million tons of
cargo was transported through them.
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The port of Gwadar is in Baluchistan,about
460 km away from Karachi. It became
operational in 2008. It is a deep-sea water port,
being constructed with heavy investment fromChina. The government of Pakistan has
projected this port as the first link to China and
Central Asian republics, by providing themwith short access route to the markets in the
Middle East and Europe.
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Port infrastructure in Pakistan is overall in
good shape. Of course, there are aspects that
could be improved, such as the connection of
the Karachi Port with other transport means orthe custom and storage facilities
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Some of the KPIs that can be set by KPT are asfollow:
Port operational performance: Dwell time, transit times, loadingand unloading rates, and availability of daytime or 24/7 port
services. Availability of services to the ship: Bunkers, waste treatment,
power, towage, and mooring.
Availability of services to the goods: Reefer container service,
bounded warehouse, consolidation/de-consolidation, containers
depot, and agriculture and sanitary area.
Degree of intermodal and logistic integration: Access to landtransport including rail and road.
IT expertise: Tracking and tracing processes and IT.
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Rail Transport
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Rail Transport Rail has become a key transport mode for freight
in developed countries and could be used totransport a higher share of heavy non-perishablegoods.
Weak rail services in Pakistan fail to offer analternative to road transportation, as it has a poorinfrastructure and management issues.
Developing rail infrastructure has costadvantages, and is more environmentally friendlythan road transportation.
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Rail Infrastructure and Services Assessment Pakistans rail network is operated by the state-
owned Pakistan Railways (PR) under thesupervision of the Ministry of Railways. Itcomprises 8,163 km, of which broad gauge tracksaccount for 7,718 km and narrow gauge tracks forthe remaining 445 km.
It only has international active links with India.
However, plans exist to also establish a furtherconnection with China and other neighboringcountries
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The financial and operational performance of Pakistan
Railway is declining since last many years. Passenger
traffic since 2007-08, has declined from 230 trains to 92
trains per day, while freight trains has went down from96 to just oneper day.
Over aged infrastructure and rolling stock, sharp
increase in fuel prices (high speed diesel), depreciation
of rupee against dollar and substantially subsidizedrailway fare have led to an increase in the cost of
operations.
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Earnings of Pakistan Railway(2000-20008)
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Earnings of Pakistan Railway(2007-2013)
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Concept Pakistan Germany
Network size (km) 8,163 41,315
Country area (sq-km) 881,640 357,021
Pakistan-Germany rail network sizecomparison
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Pakistan Railways has lost a considerable
share of its private freight traffic because many
importers and exporters are not satisfied with
the railway services, and so urgentconsignments are usually transported by truck.
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Pakistan Railway is only used for a few
specific goods such as wheat, coal, fertilizer,
cement and sugar; it is hardly used for the
transport of perishable goods.
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Pakistan-Germany Rail network usage
Comparison
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The underlying reason for the current situation
is the total lack of competition within the
sector. In a context in which there are no
alternative providers in the market and there isno modern management techniques used in
Pakistan Railways
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Rail Transport Recommendations
Despite its poor track record, rail has commercial
potential and could play a valuable transport role in the
country. The main benefit of investing in rail transportis to reduce road traffic.
Government of Pakistan should promotepublic-private
partnershipsand should increase the number of double
railway tracks, its freight capacity and should close the
freight routes where PR is making no profits.
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Other Logistical Infrastructure
The main hindrances to the sector that need
coordinated efforts by the government and private
sector is to: Establish freight villages to serve as logistics hubs
Invest in reefer storage facilities to increase the shelf life of
perishable goods
Develop public trading platforms for smaller and medium
size producers to sell their goods
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Freight Villages
Freight villages are logistics concentration points,
developed at strategic locations, which provide
various logistics-related activities like
warehousing, packing, re-packing, break-bulk etc,
Freight villages can vary in size, from fewhectares to thousands of hectares, depending on
their functions. and truck parking.
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No such facilities exist in Pakistan. In fact, not even adowngraded version of such facilities exists. As a result, the
surroundings of the larger cities are congested with a rise in
disorganized parking and waiting areas.
In parallel, unlicensed workshops, service facilities and
spare parts outlets have emerged in such areas. This
combines with a widespread lack of metropolitan
regulations on specific timings for trucks to load, unloadand circulate inside metropolitan areas, contributing to
traffic jams and pollution.
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Reefer Storage There is a lack of reefer storage facilities in Pakistan.
These facilities require strategic location such as
freight villages. The lack of reefer storage facilities at
key locations for exports is particularly critical for
companies dealing with agricultural perishable goods.
Well-stored perishables have a longer shelf life, arebetter preserved, and are of higher quality and as a
result, they sell at higher prices.
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Fruits conservation temperature requirements andmaximum life
Source: University of California.
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Trading Spaces Logistics chains of perishables in Pakistan is full with
intermediariesthat add little value to the supply chain.
Because there are few public trading spaces to small farmers
to sell their goods so most of them are unable to sell towholesalers without going through an intermediary.
If farmers were able to capture a larger portion of the profit,
they would have more money to invest in new equipment and
be able to adapt to international harvesting quality standards
thus opening new markets for Pakistani goods, benefiting not
only the individual farmers, but the economy as a whole as
well.
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Development of Wholesale Central Markets
In order to eliminate intermediaries that add little value, it is
recommended to establish regional wholesale central markets.
The Spanish MERCAs model has proved very successful and is
regarded as a good practice. It is recommended to benchmark thismodel. Such a move is expected to generate the following positive
effects:
Price structure: Prices will be set more clearly, as the market will be more
transparent.
Product quality: Will be improved through better storage in shared commonfacilities.
Inspection: It will make quality procedures and checks easier to be enforced.
Accessibility:It will make easier for small producers to access large
retailers.
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End of Topic